Sale & Agreement to Sale Section 4 of the Sales of Goods Act defines the term Sale and Agreement

to Sale. Firstly the Section states that a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. The above explanation pertains with it some certain features of a sale those are: 1. Bilateral Contract: A sale has to be bilateral because the property in goods has to pass from one person to another. Its first essential, therefore, is that the seller and the buyer must be different persons. In Graff V. Evans, the accused was the manager of a club. The club was not licensed for the sale of intoxicating liquors, but these were supplied by the manager to the members at fixed prices. This was held to be not a sale within the meaning of licensing Acts. It was merely a distribution of the liquors among the members, they being the joint owners of the club. But if the club were an incorporated body, the result would perhaps have been different. 2. Money Consideration: The consideration for a sale of goods must be money, called the price. Where the property in goods is transferred for any consideration other than money that will not be sale, but an exchange or barter. But where goods are sold for a definite sum and the price is paid partly in terms of valued up goods and partly in cash, that is sale. For example if 52 bullocks, valued 6 a piece, were exchanged for 100 quarters of barley at 2 per quarter, the difference to be made up in cash, the contract was treated as one of sale. Similarly, where corn was delivered on terms that on demand either the price would be paid or an equal quantity of corn would be returned, that was held to be a sale. 3. Goods: The subject-matter of the contract must be goods. Goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of that land which are agreed to be severed before sale or under the contract of sale. Thus, goods include every kind of movable property other than actionable claim or money. Things like goodwill, copyright, trade mark, patents, water, gas, electricity and ships are all goods and may be the subject of the contract of sale. Human organs and tissues have become an object of sale subject to statutory restrictions. The Goods which form the subject-matter of any contract of sale can be classified into various categories. This classification help in determining as to when does the property in the goods pass from the seller to the buyer. The goods may be either existing goods or future goods. Existing goods may be further classified into specific goods and unascertained goods. Specific goods are those goods which have been identified and agreed upon at the time of the contract of sale. If the goods are not identified and agreed upon at the time of making of the contract, they are known as ascertained goods. In case of specific goods, there is a possibility of the property in the goods passing to the buyer at the time of making of the contract, whereas in the case of unascertained goods, the property in the goods does not pass to the buyer unless and until the goods are ascertained. The parties are free to provide as to when the performance of the contract by each side will be made. They may provide that the delivery of the goods will be made either immediately or by instalments or on some future date. Similarly regarding the payment of price too the contract may require either immediate payment, or payment by instalments or the payment on some future date.

4. Transfer of ownership in the goods: Transfer of property i.e. the ownership in the goods from the seller to the buyer, is the essence of the contract. A sale is said to be consensual because it is necessary that the parties should agree with their free consent. Sale and Agreement to Sell: Further Section 4 distinguishes between Sale and Agreement to Sell. It states where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. Sale and Agreement to Sell can be distinguished on the following grounds: 1. In a sale the buyer becomes the owner of the goods at the time of making of contract but in an agreement to sell buyer becomes owner of goods at a later time. 2. A sale makes the buyer the owner of the goods. He can exercise al the proprietary rights in respect of them, such as an action for conversion or detenue. He acquires a jus in rem, that is, a right against the goods. The effect is that if the seller refuses to deliver the goods, the buyer may sue for recovery of the goods by specific performance. If the seller has resold the goods to another person, the buyer may follow the goods in his hands, unless that other had bought them in good faith and without notice. On the other hand, an agreement to sell is a contract pure and simple. It is not a conveyance. The buyers right are only personal against the seller, that is, a jus in personam. He can sue only for damages for breach and not for recovery of goods. 3. In a sale, since the ownership in the goods has passed to the buyer, the risk of loss, if any, of the goods is on the buyer. But in an agreement to sell, the seller remains the owner of the goods and, therefore, he runs all the risks. 4. In a sale, if the buyer commits default, the seller may sue him for the price, that is, for specific enforcement of the contract. In an agreement to sell, the sellers only remedy is to sue for damages for breach. 5. Sale is an executed contracted, where there is a contract plus a conveyance, whereas an agreement to sell is termed as executory contract pure and simple.

Sales & Hire Purchase The Hire Purchase agreement can be described as a hiring agreement coupled with an option to purchase, that is to say, the owner lets out the chattel on hire and undertakes to sell it to the hirer his making a certain number of payments. If that is the real effect of the agreement there is no contract of sale until the hirer has made the requisite number of payment, and he remains a bailee until then. But some so-called hire-purchase agreements are in reality contracts to purchase, the price to be paid by instalments, and in those cases the contract is a contract of sale and not of hiring. A hire-purchase agreement partakes of the nature of a contract of bailment with an element of sale added to it. A hirer may not be bound to purchase the thing hired but where there is an obligation or an option to buy on the terms that the hirer on payment of a premium as also the number of instalments, shall enjoy the goods which ultimately may become his property, the

transaction amounts to one of hire-purchase, though the title to the goods would remain with the owner till all the instalments are paid or the hirer has exercised his option to finalise the purchase on payment of a sum nominal or otherwise. Under a hiring agreement the hirer has a right to return the goods at any time, and thereby relieve himself from any further obligation. If the intention of the financing party in obtaining the hire-purchase and the allied agreement was to secure the return of loans advanced to their customers the transactions would merely be financial transaction. An agreement to sell and a sale have to be distinguished from a contract of hire purchase. They can be distinguished on the basis, firstly a hire purchase agreement entitles the hirer only to possession of the goods. He cannot pass a good title to any buyer from him. But a person who receives possession under an agreement to buy is able to pass a good title to a bona fide purchaser from him. Secondly, a hirer cannot claim the benefit of implied conditions and warranties created by the Act unless it becomes a sale. Thirdly, the Hire Purchase Act is applicable only to hire purchase contracts. Lastly, sales tax is not leviable on a hire purchase until it becomes sale. In a hire-purchase agreement the hirer has two options: (i) hirer has an option to buy, but no obligation to buy; and (ii) right to terminate the agreement as such. The basis of distinction between the two was ex plained by House of Lords in Helby V. Matthews. Helby let a piano on hire on the following terms: (i) Hirer should pay a certain amount per month; (ii) should he punctually pay 36 monthly instalments, the piano should become his property, until then it should continue to be the property of Helby; and (iii) Hirer had the right to terminate the hire at any time by returning the instrument to Helby. After paying a few instalments hirer pledged the instrument with the defendant, who acted in good faith. Helby sued defendant to recover the instrument. It was held that he could do so. Hirer was not in possession having agreed to buy the piano, but under a hire purchase agreement and therefore, had no right to pledge. Where the hirer does not have the option to return, it will be an agreement to buy and not a hire purchase, even if the price is payable in instalments and the seller has the power to seize the goods on default. This was established in Lee V. Butler. Here a lady hired certain furniture from plaintiff, the price to be paid in two instalments, and the plaintiff having the right to take back the furniture if an instalment was not paid. Before the last instalment was paid, the lady sold the furniture to the defendant. It was held that the defendant had acquired a good title, the lady being in possession of the furniture under an agreement to buy. She did not have the option to return but was compellable to buy.

Contract for Work & Material Sometimes a contract may involve supply of some article which also involves rendering of some work or service in respect of the same. In such a case, there may be difficulty in deciding whether it is a contract of sale of goods or a contract for work and labour or a contract of service. The problem of ascertaining the nature of the contract in such cases generally arises in the context of the liability for sales tax, which could be levied in case of sale of goods and not when the contract is one for work and labour. A contract of sale has to be distinguished from a contract involving the exercise of skill or labour

on some material. Apart from the question of liability to sales tax, the distinction is important because it is only a sale that carries a number of implied conditions and warranties. The primary difference between a contract for work or service and a contract for sale of goods is that in the former there is in the person performing work or rendering service no property, in the things produced as a whole notwithstanding that a part or even the whole of the material used him may have been his property. In the case of contract of sale, the thing produced as a whole has individual existence as the sole property, and of the party who produced it, at some time before delivery, and the property therein passes only under the contract relating thereto in goods used in the performance of the contract is not sufficient; to constitute a sale there must be an agreement express or implied relating to the sale of goods and completion of the agreement by passing of title in the very goods contracted to be sold. In every case the court will have to find out what was the primary object of the transaction and the intention of the parties while entering into it. Generally a contract to make a chattel and deliver it, when made, is a contract of sale, but not always. The test would seems to be whether the thing to be delivered has any individual existence before delivery as the sole property of the party who is to deliver it. For example A is employed by B to draw a conveyance on paper and with ink furnished by A. This is a contract for work and not for the sale of goods. When there is sale of an article with an additional and subsidiary contract to affix it, it is considered to be a contract of sale. In such a case, the main contract is to deliver the goods in which the property passes and the services put in the process is only ancillary to that. When, on the other hand, the object is to complete a certain stipulated work. In State of Rajasthan V. Nenu Ram, the Supreme Court held a contract to supply and fix wooden door and window frames and shutter to be a contract for work and not a sale. A contract of sale is a contract whose main object is the transfer of the property in, and the delivery of the possession of a chattel as a chattel to the buyer. Where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua-chattel, the contract is one for work and labour. The test is whether or not the work and labour bestowed and in anything that can properly become the subject of sale neither the ownership of the materials, nor the value of the skill and labour as compared with the value of the materials, is conclusive, although such matters may be taken into consideration is determining, in the circumstances of a particular case, whether the contract is in substance one for work and labour or one for the sale of chattel. The primary test is whether the contract is one whose main object is transfer of property in chattel as a chattel to the buyer, though some work may be required to be done under the contract as ancillary or incidental to the sale or is carrying out of work by bestowal of labour and service and materials are used in execution of such work. The test has been recognized and approved in a number of decisions of this court and it may now be regarded as beyond controversy, but the real difficulty arises in its application as there are a large number of cases which are on the border line and fall within what may be called grey area. To resolve this difficulty, the courts have evolved some subsidiary tests. The primary difference between a contract for work or service and a contract for sale of goods is that in the former there is in the person performing work rendering service no property in the things produced as a whole. In the case of a contract for sale, the thing produced as a whole has individual existence as the sole property of the party who produced it, at some time before

delivery, and the property there in passes only under the contract relating there to the other party. this was the test applied by this court in the State of Rajasthan V. Man Industrial Corporation, for holding that a contract for providing and fixing four different types of windows of certain size according to specifications, designs, drawings and instructions set out in the contract was a contract for work and labour and not a contract for sale.

Conditions & Warranties Some terms of the contract of sale constitute the hard core of the contract and their nonfulfilment may seem to upset the very basis of the contract. They may be so vital to the contract that their breach may seem to be a breach of the contract as a whole. Such terms are known as conditions of the contract and their breach entitles the innocent party to repudiate the contract. A term which is not of such vital importance is known as a warranty. Its breach does not lead to repudiation, but only to damages for breach. Section 12(1) provides that stipulations in a contract of sale with reference to goods may be conditions or warranties. The section then goes on to explain the distinction between the two. It says a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. Whereas a warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated. Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract. The court is not bound by the terminology employed by the parties. The concept of a condition is well illustrated by the case of Baldry V. Marshall. The plaintiff consulted the defendants, motor car dealers, for a car suitable for touring purposes. The defendants suggested that a Bugatti car would be appropriate and the plaintiff accordingly bought one. The car turned out to be unfit for touring purpose and the plaintiff ought to reject it. The defendants relied upon a term in the contract which guaranteed the car for twelve months against mechanical defects and excluded every other guarantee or warranty. But it was held that the suitability of the car for touring purposes was not a guarantee or warranty, but a condition of the contract. The term was so vital that its non-fulfilment defeated the very purpose for which the plaintiff bought the car. He was, therefore, entitled to reject and have refund of the price. Consequences of Breach: Since a condition is a stipulation essential to the main purpose of the contract its breach by one party entitles the other to treat contract as repudiated. For example, if the seller makes a breach of condition, the buyer may reject the goods. Similarly, if the breach is made by the buyer, the seller may treat it as a breach of contract and not perform his own part of the obligation. Option to the buyer on breach of conditions by the seller: When there is a breach of condition by the seller, the buyer may: (i) treat the contract as repudiated, or (ii) waive the condition, or (iii) treat the breach of condition as a breach of warranty.

The law implies into every sale of goods a number of conditions and warranties. They are read into every contract of sale unless they are excluded and are known as implied conditions and warranties. 1. Conditions as to title: The essence of sale being the transfer of ownership, it is one of the duties of the seller to ensure that he has the right to sell what he purports to sell. If the sellers title turns out to be defective the buyer may reject the goods. There can be no sale at all of the goods which the seller has no right to sell. The whole object of sale is to transfer property from one person to another. In fact the buyer has not received any part of that which he contracted to receive-namely, the property and right to possession- and that being so, there has been a total failure of consideration. 2. Sale by description: Section 15 of the Act lays down the conditions which is implied by law in a sale by description. It says that where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description. Two things are necessary to enable a buyer to invoke the protection of this section. First, there should be a sale by description and, secondly, the goods do not correspond with the description. The expression sale description includes many situations. 3. Sale by description as well as by Sample: The section 15 further provides that if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods correspond with the sample if the goods do not also correspond with the description. In other words, the implied condition in such cases is that the goods shall not merely agree with the sample, but must also correspond with the description. The basic insistence of the section is correspondence with description. 4. Sale by sample: This is defined in Section 17 of the Act. A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect. A sale by sample is indistinguishable from a sale by description. The law implies three conditions into every contract of sale by sample: (i) That the bulk shall correspond with the sample in quality. (ii) That the buyer shall have a reasonable opportunity of comparing the bulk with the sample. (iii) That the goods shall be free from any defect, rendering them un-merchantable, which would not be apparent on reasonable examination of the sample. There are certain types of warranties which are implied by law in a sale of goods contract. 1. Quite Possession: An implied warranty that the buyer shall have and enjoy quiet possession of the goods. It is a warranty that the vendor shall not, nor shall anybody claiming under a superior title, or under his authority, interfere with the quiet enjoyment of the vendee. 2. Free from Encumbrance: The goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made. Conditions reduced to warranty: In certain circumstances a condition is reduced to the status of a warranty. The effect is that the buyer losses his right to reject the goods. He has to be content with the remedy for damages for the breach of the conditions. This happens in the following cases: 1. Waiver by Buyer: Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty. The conditions, express or implied, are for the benefit of the buyer. He has, therefore, the option to waive the breach of a condition. In that case he remains liable for the

price, but may recover damages for the breach. The buyers election may be express or implied. 2. Acceptance of goods by buyer: Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of the condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods, unless there is a term of the contract of that effect. Thus, where the buyer has accepted the goods and thereafter discovers that some conditions was not fulfilled, he cannot reject. When a condition is reduced to the status of a warranty, the effect is not that the condition becomes a warranty, but that the condition remains a condition, it is only the remedy which changes. When the contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of condition has got to be treated as a breach of warranty. The idea behind the provision is that when the buyer has a choice of either accepting or rejecting the goods and he chooses to accept them, his right of rejection can no more be exercised. Merely taking delivery of the goods by the buyer does not necessarily mean the acceptance of them. Where goods not answering to the description contracted for are delivered to a buyer, the buyer has a right to one of two alternative remedies: (a) reject the goods and obtain a refund of the price in advance and sue for damages for non delivery. In such an event the damages he would obtain would be the difference between the contract price and the market price of the goods on the date of the breach if the latter were higher; (b) waive condition and accept the goods and sue for damages for a breach of warranty. When he accepts the goods, he has to pay the contract price less any claim for set-off for breach of warranty. Section 62 of the Act enables the parties to a sale to exclude liability for implied terms. The section recognizes three modes by which liability for implied terms may be negatived:(i) By express Contract; (ii) By course of dealing; and (iii) By trade usage.

Nemo Dat Quod Non Habet In the development of our law, two principles have striven for mastery. The first is the protection of property: no one can give a better title than he himself possesses. The second is the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle held sway for a long time but it has been modified by the common law itself and by statute so as to meet the needs of our times. The first principle is enshrined in the ancient maxim, nemo dat quod non habet, which means that no one can transfer a better title than he himself has. When the seller himself is the owner of the goods which he sells or he is somebodys agent to dispose of the goods, he conveys a good title in the goods to the buyer. Difficulty arises when the seller is neither himself the owner nor has he any such authority from the owner to sell the goods. Section 27 of the Act states this principle. It says that subject to the provisions of this Act and of any other law for the time being in force, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with consent of the owner, the buyer

acquires no better title to the goods than the seller had. So where goods are sold by a finder or a thief the buyer gets no title. Section 27, as a general rule, tries to protect the interest of the true owner when it provides that where the goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had. Exceptions: The principle of protecting bona fine commercial transactions is given effect to by engrafting a number of exceptions upon the above principle. After stating the principle in general terms, Section 27 and the three sections that follow it enumerate the situations in which nemo dat does not apply. I. Estoppel:[S.27]: Section 27 says that a purchaser may get a good title if, the owner of the goods is by his conduct precluded from denying the sellers authority to sell. II. Sale by mercantile Agent [S. 27, Proviso]: A buyer of goods from a mercantile agent acquires good title if the conditions laid down in Section 27(2) are satisfied. The conditions subject to which the rule operates may now stated as: (1). Mercantile Agent: The first requirement is that the sale must be by a mercantile agent; (2). In Possession as mercantile agent: Secondly, the mercantile agent should be in possession of the goods as mercantile agent. If the goods are entrusted to him in any other capacity, he cannot convey a good title. (3). With owners Consent: Thirdly, the goods should be in the possession of the mercantile agent with the consent of the owner. This requirement is satisfied when it is shown that the true owner did intentionally deposit in the hands of the mercantile agent the goods in question. When this is so, then it is immaterial that the consent was obtained by fraud of tricks or other methods which render the consent voidable. (4). Must sell while acting as mercantile agent: Fourthly, the mercantile agent must sell the goods when acting in the ordinary course of business of a mercantile agent. It means acting in such a way as a mercantile agent in the ordinary course of business as a mercantile agent would act; that is to say, within business hours, at a proper place of business, and in other respects in the ordinary way in which a mercantile agent would act, so that there is nothing to lead the other party to suppose that anything wrong is being done. (5). Good faith and without notice: Lastly, the buyer must act in good faith and should not have notice that the seller has no authority to sell. Mere suspicion should not amount to notice. But it is well established that suspicion in the mind of a person, and the means of knowledge in his power willfully disregarded, would amount to notice. III. Sale by Joint Owner [S. 28]: If one of the several joint owners of goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell. IV. Sale by Person in Possession under Voidable Contract [S. 29]: When a person has obtained possession of the goods under a voidable contract and he makes a sale of them, the buyer gets a good title provided the contract has not been avoided at the time of the sale and the buyer acts in good faith and without notice of the sellers defect in the title. The first condition for application of this exception is that the goods should have been obtained

under a voidable contract as opposed to a void contract. Where possession of the goods is obtained under a void contract, the buyer does not get a good title. Sale after avoidance of contract does not pass title: The next requirement is that the contract must not have been rescinded at the time of the sale. The usual method of rescinding a contract is by giving notice to other party of the intention to rescind. If he makes a sale after receiving this notice, he cannot convey a good title to the buyer. Where the goods have been taken away by a fraudulent person who will keep out of the way and cannot be communicated with, the contract may be rescinded by doing whatever the owner of the goods can do to regain possession. Good faith and without notice: The last requirement is that the buyer should act in good faith and should not have notice of the sellers defective title. V. Seller in possession after the Sale [S. 30(1)]: Where a seller, having sold goods, continues to be in possession of them, and sells them over again to another person, the buyer gets a good title provided the conditions of Section 30(1) are satisfied. The first requirement of the exception is that the seller should continue to be in possession of the goods after having sold them. Where, however, the sale has been completed by delivering the goods to the buyer, this exception will not apply even if the buyer has subsequently returned the goods to the seller for some specific purpose and they are in the possession of the seller when he resells them. In such cases the second buyer does not get a good title. The buyer has to act in good faith and without notice of the fact that the goods in question were already sold. It is necessary for this condition to be satisfied that the sale must take place in the sellers ordinary course of business of a mercantile agent. VI. Buyer in possession before sale [S. 30(2)]: Where a person has bought or has agreed to buy certain goods of which possession has been given over to him, but the seller still has some lien or right over the goods, if the buyer resells the goods the second buyer will get a title free from the sellers right of lien. VII. Resale by an Unpaid Seller: According to Sec. 54(2), if an unpaid seller has exercised the right of lien or stoppage in transit and the buyer does not pay him, he may resell the goods after a notice to the buyer. If such a notice is not given, the seller is neither entitled to claim from the buyer any loss if the goods bring lower than the contract price nor can he retain the benefit if the goods are sold at a higher price. When an unpaid seller has exercised his right of lien or stoppage in transit and resells the goods, the buyer acquires good title thereto as against the original buyer, notwithstanding that no notice of the resale has been given to the original buyer. VIII. Sale by Finder of Goods: According to S 71, Indian Contract Act, the finder of goods is subject to the same responsibility as the bailee. He is to take due care of the goods while they are in his possession and also to return them when their owner has been found. According to S 169 of the Indian Contract Act, however, if the owner cannot with a reasonable diligence be found or if he refuses upon demand, to pay the lawful charges of the finder, the finder may sell the goods. When the goods is in danger of perishing or of losing the greater part of its value, or when the lawful charges of the finder, in respect of the thing found, amount to two-third of its value the finder may sell the goods and the buyer of such gods gets a good title. IX. Sale by Pawnee: Normally, the pawnee of the goods is under a duty to return them if the debt secured by such goods is paid back to him. According to S. 176, Indian Contract Act, if the pawnor makes a default in the payment o the debt, the pawnee may either sue him for the debt

or may sell the goods pledged on giving the pawnor reasonable notice of the sale. Upon such a sale being made by the pawnee, the buyer of such goods acquires a good title to them. X. Sale in Market Overt: The sale of goods in market according to the usage of the market, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of any defect or want of title on the part of the seller. Such sale means sale in the open market by a person who generally deals in such goods. The buyers title is protected in case of such a sale though the seller may be liable for the tort of conversion. Unpaid Seller Section 45 of the Sales of Goods Act defines the term unpaid seller. The seller of goods is deemed to be an unpaid seller within the meaning of this Act: (a) When the whole of the price has not been paid or tendered; (b) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. A seller who has only received a part of the price is also an unpaid seller. Where the seller has received a negotiable instrument, like a bill of exchange, promissory note or cheque, for the price, he is not a unpaid seller. But if, before he has delivered the goods, the negotiable instrument is dishonoured, then he becomes an unpaid seller and may exercise his rights. This is so because a negotiable instrument is always presumed to have been received as a conditional payment and the condition is not fulfilled when it is dishonoured. If the bill is dishonoured before delivery has been made, then the vendors lien revives; or if the purchaser becomes openly insolvent before the delivery actually takes place, then the law does not compel the vendor to deliver to an insolvent purchaser. The protection afforded by the Act to an unpaid seller are also extended to any person who is in the position of a seller, as for instance, an agent of the seller to whom the bill of lading has been endorsed or a consignor or agent who has himself paid, or is directly responsible for the price. But this provision does not operate so as to convert a buyer into a seller. Section 46 seeks to protect the interest of an unpaid seller by conferring upon him the following rights against the goods, notwithstanding the facts that the property in the goods has passed to the buyer: (i) a lien on the goods for price while he is in possession of them; (ii) in case of the insolvency of the buyer a right of stoppage of the goods in transit after he has parted with the possession on them. (iii) a right of resale as limited by Act. These rights of an unpaid seller do not depend upon any agreement, express or implied between the parties. They arise by implication of law. They are some of the incidents attached by law to a contract of sale. The buyer has no right to have possession of the goods till he pays the price. The sellers right in respect of the price is not a mere lien which he will forfeit if he parts with the possession, but grows out of his original ownership and dominion, and payment or a tender of the price is a condition precedent on the buyers part and until he makes such payment or tender, he has no right to the possession. These rights generally presuppose that the property in the goods has passed to the buyer, and, in order to assure the same rights and protections to seller where the property has not passed,

Section 46(2) specially declares that where the property in the goods has not passed to the buyer, the seller would have the same rights of lien and stoppage in transit which he would have had as if the property had passed. Lien is the right to retain possession of goods until certain charges due in respect of them are paid. The unpaid seller has the right to retain the goods until he receives their price. Section 47 provides that the unpaid seller of goods who is in possession of them is entitled to retain his possession until payment or tender of the price in the following cases, namely: (1) Where the goods have been sold without any stipulation as to credit; (2) Where the goods have been sold on credit; but the term of credit has expired; (3) Where the buyer becomes insolvent. Where the goods are sold on credit, the right of lien is suspended during the term of credit. But on the expiry of that term, if the goods are still in the possession of the seller, his lien revives. The right of lien is linked with possession and not with title. Thus, where seller has transferred to the buyer the documents of title to the goods, his lien is not defeated as long as he remains in the possession. Even where the seller issued to the buyer delivery orders thereby converting himself from an owner into a bailee for the buyer, his lien was not defeated. For Section 47(2) clearly declares that the seller may exercise his lien notwithstanding that he is in possession of the goods as agent or bailee for the buyers. The right of lien exists only for the price of the goods. The seller is not entitled to lien for any other charges, i.e., charges for stronger or the like. Section 48 of the Act provides for part delivery. Where an unpaid seller has delivered a part of the goods, he may exercise his lien on the remainder. Where delivery of a part is intended as a delivery of the whole, the lien is lost. If both parties intend it as a delivery of the whole, then it is a delivery of the whole; but if either of the parties does not intend it as a delivery of the whole if either of them dissents, then it is not a delivery of the whole. Where the contract envisages delivery of goods by instalments, the buyers default in paying for one instalment does not entitle the seller to stop delivery of the rest of the instalments unless: (1) the buyer has become insolvent, or (2) the buyers default amounts to repudiation of the whole contract. Termination of Lien: Lien is linked with the possession and is lost when possession is lost. Section 49 accordingly provides that the unpaid seller of goods loses his lien in the following cases: 1. By delivery to Carrier: Delivery of the goods to a carrier for the purpose of transmission to the buyer operates as a delivery to the buyer himself, and therefore, the right of lien is thereby lost. Delivery to a carrier puts an end to lien, but the seller still has the right of stoppage in transit. If the seller regains possession of the goods from the carrier by exercising his right of stoppage in transit, his lien revives. But if he takes back the goods from the carrier for any other purpose, the lien does not revive. Where the seller has reserved the right of disposal of the goods his lien continues till the end of the transit. 2. By delivery to Buyer: The right of lien is also lost when the goods are delivered to the buyer or his agent. The effect of delivery to the buyer is stated as when the vendor has given the buyer possession under the contract of sale all his rights in the goods are completely gone; he must recover the price exactly as he would recover any other debt and has no longer any claims on the goods sold superior to those of any other creditor. The delivery and acceptance of possession complete the sale, and give the buyer absolute, unqualified and indefeasible right of property

and possession in the things sold, though the price be unpaid and the buyer be insolvent. Where the goods are delivered back to the seller for a specific purpose, such as repair of a machine sold, that does not revive the sellers lien. The sellers lien is, however, not defeated where the buyer has obtained possession without the consent of the seller. The buyer has to obtain possession lawfully and under the contract. 3. By waiver: The right of lien is attracted by implication of law to every contract of sale for the benefit of the seller. The seller may, therefore, if he so likes, waive his right. Waiver may be express or implied from the conduct of the seller. An implied waiver takes place when the seller is guilty of some wrongful act in reference to the goods, such as dealing with the goods in a manner inconsistent with the mere right to have possession of them, as by wrongfully re-selling or consuming them, or by claiming to keep them on some ground other than his right to lien. 4. By tender of price: When the buyer tenders price for the goods, the seller ceases to be an unpaid seller, and, therefore cannot, by his voluntary refusal to accept the price, convert himself into an unpaid seller and claim lien. Both the rights are designed for the protection of the unpaid seller. The effect of their exercise is also the same, because when the seller stops the goods in transit he resumes possession and the goods once again fall into the spell of his lien until the price is paid. Yet, it is important to keep them distinct, because, though the rights are analogous, they are in certain respects governed by different considerations. Requirements of stoppage in transit: (i) The first requirement is that the seller should be unpaid; (ii) The second that the buyer should have become insolvent; (iii) The property should have passed to the buyer, for, if the seller reserves the right of disposal, the goods remain his property, and, therefore, under his lien; and (iv) The goods should be in the course of transit. Commencement and end of transit [S. 51]: Section 51 tries to solve the difficulty by laying down basic propositions which govern the commencement and end of transit: 1. Delivery to Buyer: Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent takes delivery of them. Thus, transit ends when the goods are delivered to the buyer or his agent. 2. Interception by Buyer: The transit ends when the buyer or his agent takes delivery of the goods from the carrier before their arrival at the appointed destination. It may be wrongful for the carrier to deliver the goods to the buyer before their arrival at the appointed destination and the carrier may be held liable in damages for depriving the seller of his opportunity, but transit ends with that. The mere fact that the buyer takes his seat as a passenger in the ship which is carrying the goods does not amount to delivery to the buyer before their arrival at the appointed destination. 3. Acknowledgement to buyer: When the goods have arrived at their appointed destination and the carrier acknowledges to buyer or his agent that he is now holding the gods on his behalf, the transit is at an end, and it is immaterial that the goods are still with the carrier or that the buyer has indicated a further destination. It requires a very clear acknowledgement to put an end to the original contract of carriage. 4. Rejection by Buyer: If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not at an end. This will be so even if the seller

himself has refused to take back the goods. 5. Delivery to ship chartered by buyer: Where the goods are delivered to a ship chartered by the buyer, it is a question of fact in each case whether the carrier is acting independently or as agent of the buyer. If the circumstances show that the carrier is acting as an agent of the buyer, then the transit is at an end as son as the goods are loaded on board the ship. But the mere fact that the ship is chartered by the buyer and he has given no indication of the destination of the goods does not mean that the carrier has become the agent of the buyer. When the vendor knows that he is delivering the goods to someone as carrier, who is receiving them in that character, he delivers them with the implied right of stopping them so long as they remain in the possession of the carrier as carrier. 6. Wrongful refusal to deliver: Where the carrier wrongfully refuses to deliver the goods to the buyer or his agent, the transit is at an end. It is obvious that the goods should have been arrived at their destination, because otherwise the carrier has the right to refuse to deliver them. 7. Part Delivery: Where the goods have been delivered in part, the seller may stop the remainder of the goods, unless the part delivery shows an agreement to give up the possession of the whole. How Stoppage is effected: A notice is given to the carrier to stop the gods and redeliver them to the seller or according to his directions. Notice may be given to the person in actual possession or to his principal, in which case there should be sufficient margin of time to enable the principle to communicate with his agent. Effect of Sub-Sale: The unpaid sellers right to lien or stoppage in transit is not affected by any sale or other disposition of the goods by the buyer. Thus, for example, in Mordaunt Brothers V. British Oil and Cake Mills, an oil merchant sold a quantity of oil to B, without appropriating any particular oil to the contract. B sold some of it to C and gave him a delivery order. C lodged the delivery order with the merchant requesting him to await his orders. Meanwhile B failed to pay the merchant, who, therefore, became an unpaid seller. It was held that the merchants lien on the goods for the price was not defeated by Bs sale to C and he could retain the goods till the price was paid. But there are two cases in which the buyers dealings with the goods defeat the sellers right against the goods. They are : 1. Sellers Consent: Where the buyer sells or makes other disposition of the goods with the consent of the seller, that is binding on the seller. The assent contemplated must be such an assent as in the circumstances shows that the seller intends to renounce his rights against the goods. It is enough to show that the fact of a sub-contract has been brought to his notice, and that he has assented to it merely in the sense of acknowledging the receipt of information. This was pointed out in Mordaunt Brothers V. British Oil and Cake Mills, where the seller was informed of the sub-sale after it had been effected and it was held that by this the seller had merely acknowledged the existence of the sub-sale subject to his own rights the goods until paid for. 2. Transfer of documents of title: When the seller has issued to the buyer documents of title to the goods and he has sold or pledged the goods by transferring the documents of title, then in the case of sale, the sellers right of lien and stoppage in transit are defeated and, in case of pledge, his right become subject to the pledge. It is necessary that the transferee should act in good faith and should have given value for the goods. He should not at the time have the notice of the fact that the original seller is still unpaid and has rights against the goods.

Thus, resale by the buyer by transfer of the documents of title completely defeats the sellers right against the goods. But a pledge does not completely defeat the sellers right against the goods. It only makes his rights subject to the pledge. The effect is that the seller may still exercise his rights by paying off the pledge. 3. Right of Resale: The contract of sale is not rescinded when the seller exercises his right of lien or stoppage in transit. The contract still remains in force and the buyer can claim delivery of the goods on tendering the price. The property having passed to the buyer, it is not revested in the seller. But obviously the law cannot allow the things to stand in that condition indefinitely. The seller is, therefore given a limited right to resell the goods. In the first place, he may resell the gods without reference to the defaulting buyer if the goods are of perishable nature. Secondly, in other cases, the seller should give a notice to the defaulting buyer of his intention to resell. If the buyer does not pay the price within reasonable time after receiving the notice, the seller may resell the goods. He can recover from the defaulting buyer any loss occasioned by his breach of contract. He can also keep any profit which may occur on the resale. But if the unpaid seller sells the goods without serving upon the buyer a reasonable notice, the seller cannot recover damages for the breach and he has also to hand over any profit to the buyer made on the resale. The seller may expressly reserve the right of resale in case the buyer should make a default. In such a case no notice of sale is necessary. The contract is automatically rescinded when the seller resells the goods. He does not resell as an unpaid seller, but as an original owner of the goods. Where the buyer pays a deposit he is entitled to refund of it when the seller resells the goods, but subject to the sellers claim for damages. Where the seller does not offer evidence of the difference between the contract price and resale price on the date of breach, he is not entitled to any compensation.